The impact of oil-market shocks on stock returns in major oil-exporting countries
By S. Basher, A. Haug, Perry Sadorsky. Journal of International Money and Finance, 2018
212 citations recorded by the source corpus.
The impact that oil-market shocks have on stock prices in oil exporting countries has implications for both domestic and international investors. We derive the shocks driving oil prices from an oil market model that explicitly identifies speculative trading in the crude oil market. We study the nonlinear relationship of oil price shocks with stock market returns in major oil-exporting countries in a multi-factor Markov-switching framework. Flow oil-demand shocks have a statistically significant impact on stock returns in Canada, Norway, Russia, Kuwait, Saudi Arabia, and the UAE. Idiosyncratic oil-market shocks affect stock returns in Norway, Russia, Kuwait, Saudi Arabia and UAE. Speculative (oil-inventory) shocks impact stock returns in Canada, Russia, Kuwait and the UAE. Flow oil-supply shocks matter for the UK, Kuwait, and UAE. Mexico is the only country where stock returns are unaffected by oil-market shocks. A portfolio that uses the Markov-switching probabilities to switch between equities in the low volatility state and T-bills in the high volatility state outperforms a buy and hold strategy for some countries.
Subfields: Economics and Econometrics, Renewable Energy, Sustainability and the Environment
View Paper: https://www.semanticscholar.org/paper/86acd22094aa1442e9e7e6d340eafb619f2ca156
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In Economics and Econometrics
- En-Ze Wang
- Lu Liu
- Chien‐Chiang Lee
- Paresh Kumar Narayan
- Muhammad Shahbaz
- James E. Payne
- Russell Smyth *
- B. N. Iyke
In Renewable Energy, Sustainability and the Environment
- Chien‐Chiang Lee
- Muhammad Shahbaz
- James E. Payne
- Russell Smyth *
- V. Costantini
- Chiara Martini
- Perry Sadorsky
- Fatih Karanfil
Citations in the corpus
- Impact of the COVID-19 Pandemic on the Crude Oil and Stock Markets in the US: A Time-Varying Analysis (2020, background): “Although previous research findings into the oil-stock nexus have been inconsistent and contradictory (Balcilar et al., 2019; Basher et al., 2018), it can reveal the fact that exploring the epidemic-crude oil nexus and epidemic-stock nexus separately is not satisfactory.”